Silver Lining 
By Martin Harris

Two "if"’s: if every dark cloud has its silver lining, and, if the opposite of "no good deed goes unpunished" is "no bad deed goes unrewarded", maybe the success of the Golden Dome folks in re-drawing the Vermont economy with an objective of making a passive-income base more important than what remains of an unloved active-income base, has gathered up one reward in the form of a remarkably strong (compared to almost everywhere else) housing market. It now seems that the housing-market slump sweeping the nation has had less effect within Vermont than did the last real estate downturn, which took place in the early 90’s and resulted in a temporary value slump in the 10 to 15 percent neighborhood. Recent charts and tables, published in such media venues as The Wall Street Journal, consistently show Vermont, frequently right alongside North Dakota (for a different set of reasons), among the States least burdened with distressed sub-prime mortgages, foreclosures, unsold housing inventory, or price depression. Since this is an opinion piece, here’s my opinion: it traces back to Vermont’s relatively new economic landscape, with a politically-engineered high cost of entry and equally high cost of staying resulting in a higher-than-average proportion of home-owners wealthy enough to be unaffected by the various economic pressures affecting the budgets of less-well-endowed folks elsewhere.

One indicator of this trend is the median price per house, which is up a couple of percent compared to the national-median, down eight percent, or such hard-case areas as Prince William County, VA (down 32 percent) or Sacramento, CA (down 34 percent). Sales in Vermont are stagnant (ask your local real estate broker, as I did) compared to a national downturn of 18 percent and an upturn in the most price-depressed areas (a real-time demonstration of the supply-demand-price curve there, for those willing to recognize how markets actually work) as exemplified by a plus-62-percent statistic for Prince William County and a plus-41-percent uptick for Sacramento.

As an amateur economist, I admit my inability to find statistical proof for my thesis that the GD long-term strategy of growing the passive economy sector while –how can I say this graciously?—stunting the active income sector has resulted in Vermont’s housing market remaining Number 1 or close as shown in various indicators of minimal debt distress or value change compared to other States. And, indeed, it may be merely a correlation, not a causation, that passive income in Vermont has gone up by several hundred percent in the last dozen years (IRS data) while active income has pretty much stagnated, adjusted for inflation, while farm income has tumbled by a third; but there would seem to be some logic to the idea that housing with mortgages supported by active incomes in wage or business sectors is more vulnerable to widespread economic downturn than housing owned mortgage-free or carrying mortgages supported by passive-income checks which keep coming irrespective of overall economic trends.

Interestingly, the numbers show the percentage of single-family Vermont houses as mortgage-free to be 31%, just about at the national average of 30%. It turns out that mortgage-free home-ownership doesn’t correlate to median family income, as evidenced by the lowest mortgage percentages in such not-exactly gentry-left States as West Virginia (48%) or North Dakota (42%) but more like such higher MFI blue States as California and Colorado (21%). What matters, apparently, is not the existence of a mortgage obligation but the ease with which it can be paid. In such areas, as in many others, wealth matters. In this respect, it turns out Vermont is second highest in the nation with seasonal-home percentage (15%) right behind Maine at 16%; the national average is 3%. With no housing-bubble distress in Vermont, tax assessments and not been cut and revenues have continued to flow to government. That hasn’t been the case elsewhere, as shown by Vallejo, CA, now in municipal bankruptcy; more on this subject next week.
 

Martin Harris is a former Chairman of Citizens for Property Rights